What is the relationship between Bitcoin and the Nasdaq? Why are there divergences?

What is the relationship between Bitcoin and the Nasdaq Index? Why does the divergence occur? Recently, there has been a divergence between the trends of BTC and the Nasdaq. The Nasdaq has continued to hit new highs while BTC has declined, driving the overall crypto market to fall significantly. This is inconsistent with the traditional impression that the Nasdaq has a positive correlation with BTC. So what is the logic behind this? Historically Has a similar situation occurred?

Today, the editor of this website will give you a detailed introduction to the review of this and the last bull market and try to explore the correlation strength and changes between the two in different time dimensions. Friends who need it can take a look together!

The relationship between BTC and the Nasdaq

In fact, BTC and US stocks do not have a positive correlation with a fixed coefficient, but have different degrees of correlation at different stages of the cycle. Looking back at the last bull market and this current bull market, we can find several rules:

1. The initial starting point and final end point of the two rises are completely consistent in time latitude

(the starting point of the last round 2020/3 & the last round Peaked in 2021/11 & the starting point of this round is 2023/1)

2. The rising process of the two is different

The rising speed of the Nasdaq is relatively stable, while the straight line showing an approximate fixed slope from the k-line

BTC is different , the rising process is closer to exponential growth. The initial rising rate is slow, and then rises rapidly after a certain point in time. Coincidentally, this "turning point" of accelerated rise corresponds to the first time in the Nasdaq rising stage. The callback has stabilized.

(2020/10 & 2023/10)

3. At the same time, BTC’s first peak corresponded to the second small correction platform in the rising stage of the Nasdaq

(2021/4 & 2024/3)

So which stage in history does the current market position correspond to? Is there any trace of the rise and fall of BTC that the market is experiencing in US stocks?

It can be found that during most of the two rounds of bull markets, BTC and US stocks maintained a positive correlation. Negative correlation stages occurred but were not dominant. In the last bull market, after BTC peaked for the first time, the Nasdaq continued to rise, but BTC pulled back, and the trends of the two diverged (the yellow box in the figure below). This is similar to the current situation of the market, and history has Repeated again in the same place.

What will be the subsequent market trend? How long will the divergence between BTC and the Nasdaq continue? How to respond to the divergence? From two aspects: time and intensity:

1. In the last round of bull market, the divergence between the two lasted for a short time. On a weekly basis, it lasted about 9 weeks, and then returned to a positive correlation (weekly level). ).

2. In the last bull market, the time when the two regained their positive correlation was when the BTC daily level showed obvious decline in strength and reached an important support position.

If measured by historical standards, it can be seen that the current market has not fully met the conditions for divergence recovery and needs to wait for more K-line information.

So how to logically understand this special common trend that appeared in both bull markets.

Whether it is BTC, gold, or US stocks, the macro environment is the same. Prices are restricted by financial liquidity, risk-free asset rate of return and other factors. BTC, as a more elastic asset type, can be strong in the early stages of the bull market. After the main rise, it significantly outperformed the U.S. stock market, but things must reverse at the extremes. There is no permanent strength. After the main rise, it became weaker than the U.S. stock market. This is similar to the relationship between altcoins and BTC.

Looking at it from another perspective, during the main rise stage, market liquidity is sufficient to support the overall rise in asset prices. However, after rising to a certain level, the fuel or motivation for the rise is exhausted and it is difficult to support the collective rise of all categories of assets. Over time, there may be a situation where one goes up and the other goes down.

From the perspective of event factors, the market has recently been affected by selling pressure from the German government and Mentougou. No matter how you interpret this trend, BTC will eventually return to a positive correlation with US stocks after the adjustment is fully in place.

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